Interest, Debt and Capital Accumulation—A Kaleckian Approach

Eckhard Hein

International Review of Applied Economics, 2006, vol. 20, issue 3, 337-352

Abstract: In the present paper we explicitly introduce interest payments and debt into a Kaleckian distribution and growth model with an investment function very close to Kalecki's original writings. This implies that growth in this model is 'wage-led'. The effects of interest rate variations on the short-run equilibrium values of capacity utilisation, capital accumulation and the rate of profit are derived, and the long-run effects on the equilibrium debt-capital ratio are analysed. It is shown, that the effects of interest variations on the endogenously determined real equilibrium values of the model do not only depend on the parameter values in the saving and investment functions but also on the interest elasticity of distribution and in some cases on initial conditions with respect to the interest rate and the debt-capital ratio. If the conditions for short-run 'normal' effects of interest rate variations are given, the economy will be characterised by a long-run unstable debt-capital ratio and by the macroeconomic 'paradox of debt'. These results are similar to other models in the tradition of Kalecki and hint to the robustness of Kaleckian 'monetary' distribution and growth models with respect to the concrete specification of the investment function.

Keywords: Interest rate; debt; capital accumulation; Kaleckian model (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/02692170600736128 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Interest, debt and capital accumulation - a Kaleckian approach (2005)
Working Paper: Interest, debt and capital accumulation - a Kaleckian approach (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:irapec:v:20:y:2006:i:3:p:337-352

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIRA20

DOI: 10.1080/02692170600736128

Access Statistics for this article

International Review of Applied Economics is currently edited by Professor Malcolm Sawyer

More articles in International Review of Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().